Trinidad and Tobago’s limited counter-terrorism capabilities will prevent the government from effectively managing the return of militants from Syria and Iraq. However, the country will remain a low priority target for terrorist attacks. Despite a return to growth, persistent fiscal deficits will elevate sovereign credit risks in 2017.
Islamic State (IS) has been successful in recruiting fighters from Trinidad and Tobago. The country has the highest per capita number of foreign fighters who have joined IS in the Western Hemisphere. Between 100 and 400 Trinidadian nationals are estimated to have travelled to Iraq and Syria to join the group. Trinidadian nationals have also financed terrorist activity, and the assets of 252 people on the United Nation’s ISIL (Da'esh) and Al-Qaida Sanctions List were frozen in November 2016.
The government in Trinidad and Tobago has limited counter-terrorism capabilities. It currently has no policies designed to manage the return of individuals who joined the group in the Middle East. It is not clear how many have already returned, yet numbers are likely to rise as IS loses territory. Despite this, the risk of a terrorist attack in the country is low in 2017.
IS has primarily focussed on recruiting from the country, rather than encouraging Trinidadian nationals to launch attacks domestically. Moreover, Trinidad and Tobago has not participated in the anti-IS coalition and would be a relatively low profile target. If an attack were to occur, it would most likely take the form of a marauding active shooter incident, given the easy availability of firearms in the country. Tourist resorts would be attractive targets. Domestic terrorists currently lack the capability to launch a more advanced improvised explosive device attack on oil and gas infrastructure.
Trinidad and Tobago will experience a modest return to growth in 2017, as natural gas production expands and higher energy prices support export revenues. BP’s USD 2 billion offshore platform, Juniper, is expected to come online in 2017. The project has a production capacity of 590 million standard cubic feet a day. Real GDP growth is forecasted at 2.0% in 2017, up from -4.5% in 2016.
Despite the positive outlook for the hydrocarbon sector, the Trinidadian economy faces significant head winds. The government has run fiscal deficits since 2009, and is expected to do so in the period to 2026.
In 2017, the budget deficit is forecasted at 3.7% of GDP. The government has taken some steps to reduce its spending obligations and plans to raise the price of diesel fuel to 75% of its market rate in 2017. However, deeper structural spending cuts to subsidies and social transfers would be politically challenging, meaning that expenditures are still forecasted to rise by an average 4.6% between 2017 and 2020.
In an effort to finance the budget, in March 2017 the government approved a USD 251 million drawdown from its sovereign wealth fund. This underscores the growing difficulty Trinidad and Tobago faces in financing its fiscal deficit. The drawdown will undermine the country’s fiscal reserves, elevating sovereign credit risks.
The Trinidadian government recognises the need to diversify the economy away from hydrocarbons and attract foreign investment in a range of sectors. As a result, expropriation is unlikely to target foreign investors in the medium term outlook. The legal system generally meets international standards, although judicial inefficiencies weigh on the ability of companies to have contracts enforced in a timely manner.
The business environment can be challenging for international companies, weighing on the attractiveness of Trinidad and Tobago as a destination for foreign investment. There is an elevated risk of project delays and contract alterations as government ministries and agencies often have overlapping powers to make final investment decisions. In May 2016 OAS Construtora Ltd and Namalco Construction Services had their construction contract for the USD 1.1 billion Point Fortin Highway project cancelled due to government dissatisfaction with the contract terms.
In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Nigeria, Trinidad and Tobago and Russia, all of which have been the subject of recent enquiries from JLT's client base.
The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.
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For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email firstname.lastname@example.org